VZCZCXRO1721
PP RUEHC RUEHSD
DE RUEHTV #2760/01 3450810
ZNY SSSSS ZZH ZUI ZDK RUEHZC SVC 4078
P 100810Z DEC 08
FM AMEMBASSY TEL AVIV
TO RUEHC/SECSTATE WASHDC PRIORITY 9530
INFO RUCNIRA/IRAN COLLECTIVE PRIORITY
RUEHAD/AMEMBASSY ABU DHABI PRIORITY 4716
RUEHTH/AMEMBASSY ATHENS PRIORITY 0552
RUEHRL/AMEMBASSY BERLIN PRIORITY 0461
RUEHRO/AMEMBASSY ROME PRIORITY 6800
RUEHDIA/AMCONSUL DUBAI PRIORITY 0096
RUEHJM/AMCONSUL JERUSALEM PRIORITY 0970
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

S E C R E T SECTION 01 OF 04 TEL AVIV 002760 
 
SIPDIS 
 
TREASURY FOR LEVEY, S. 
ATHENS FOR PURCELL, A. 
 
E.O. 12958: DECL: 12/10/2018 
TAGS: KTFN EFIN ECON KWBG IR IS
SUBJECT: U/S LEVEY REASSURES GOI THAT NO MOMENTUM WILL BE 
LOST IN THE FIGHT AGAINST TERROR FINANCE 
 
Classified By: A/DCM Marc Sievers for reasons 1.4 (b) and (d) 
 
------- 
SUMMARY 
------- 
 
1.(S) In a visit to Israel on 16-17 November, Treasury Under 
Secretary for Terrorism and Financial Intelligence, Stuart A. 
Levey, reassured GOI officials that no momentum would be lost 
in USG efforts to combat terrorist financing or to pressure 
Iran during the transition to a new US administration in 
January. In meetings with Foreign Minister Tzipi Livni, 
Mossad Director Meir Dagan, National Security Council 
Chairman Dani Arditi, and others, U/S Levey emphasized recent 
U.S. designations against the Union of Good, the Islamic 
Republic of Iran Shipping Lines (IRISL), and the recent 
revocation of Iran's "U-Turn" license. In response to GOI 
officials' pressure to have the U.S. designate the Central 
Bank of Iran (CBI), Levey underscored the importance of 
international, multilateral concurrence for such an effort to 
be a success. 
 
2.(S) Israeli officials were keen to outline an "escalation" 
in CBI programs that they believed pose a danger to the 
international financial system. Several key Israeli officials 
identified Reza Raei, Vice Governor of the CBI, as a key 
figure in masterminding new ways to help the Iranian 
commercial and banking sectors circumvent sanctions. Levey 
promised to continue pushing the Gulf states on adopting 
stronger regulation until the last day of his appointment. 
 
3.(S) Mossad Chief Meir Dagan informed Levey that sanctions 
were beginning to have a negative effect on Iran's regime. 
NSC Chairman Arditi also told him that the PA was performing 
well in its renewed fight against terror finance in the West 
Bank. END SUMMARY. 
 
--------------------------------------------- ----- 
GOI CONCERNED ABOUT COUNTER TERROR FINANCE POLICY CONTINUITY 
--------------------------------------------- ----- 
 
4.(S) National Security Council (NCS) Chairman, Dani Arditi, 
in a November 16 meeting with U/S Stuart Levey, asked whether 
Levey thought his efforts would continue into the next U.S. 
administration. Even though he said he planned to resign as 
required in January, Levey told Arditi that he believed the 
Obama team would be committed to continuing the ambitious 
program against terrorism finance that he has shepherded over 
the last several years. Saying counter- terrorism finance was 
not a partisan issue in the U.S., Levey subsequently 
confirmed these sentiments to Foreign Minister (FM) Tzipi 
Livni and Mossad Director Meir Dagan in separate meetings 
that occurred on the following day, November 17. 
 
---------------------- 
IRAN/NON-PROLIFERATION 
---------------------- 
 
5.(S) On November 16, Levey outlined for Ministry of Foreign 
Affairs Deputy Director General for Strategic Affairs Alon 
Bar, and Senior Deputy Director General Yossi Gal positive 
developments in the Iran effort. He told them that Treasury 
had been very successful in curtailing business with Iran by 
most "major players". Levey said that expanding the 
non-proliferation strategy into insurance, and putting 
pressure on Iran's oil refining capacity and Liquid Natural 
Gas (LNG) industry were next steps being pursued. He also 
reported that the recent IRISL designation has been unusually 
effective. 
 
CBI's Reza Raei Masterminds New Methods 
--------------------------------------- 
 
6.(S) During their November 16 meeting, Arditi told Levey 
that the Israeli intelligence community has continued to see 
an escalation in CBI efforts to help designated Iranian 
commercial banks circumvent international and U.S. sanctions. 
 The NSC Chairman presented several recent examples of CBI 
behavior that he characterized as unusual for a central bank. 
Arditi identified Reza Raei, Vice Governor of the CBI for 
Foreign Exchange Affairs, as the mastermind of these new 
 
TEL AVIV 00002760  002 OF 004 
 
 
efforts. 
 
7.(S) Meir Dagan subsequently told Levey that the CBI had 
engineered a way for the UN-designated Iranian bank Sepah to 
conduct foreign business transactions through use of the 
Iranian Postal Bank. Bank Melli, a USG-designated bank, had 
also purchased shares in investment funds as a way to escape 
the effects of the sanctions, according to Dagan. Using these 
methods, Melli and Sepah have been able to fabricate a method 
of providing correspondent-like banking services to 
designated Iranian banks that find it increasingly difficult 
to deal in foreign currency. Arditi named the "Persia Equity 
Fund" as one such financial instrument being used by Melli. 
Levey commented that any such investment fund or financial 
instrument could be listed as a derivative designation of 
Melli if enough evidence could be shown linking the two 
organizations. Levey told Meir Dagan that he was in favor of 
pursuing a designation of Raei if GOI allegations were 
accurate. 
 
No International Support for Designation of the CBI 
--------------------------------------------- ------ 
 
8.(S) Arditi and subsequently, Dagan, asked Levey whether the 
USG was considering a designation of the CBI. Although 
Treasury had looked into the possibility, said Levey, a 
designation of the CBI would be ineffective without a 
multilateral effort. International support for such an effort 
simply did not yet exist, Levey explained. He told Dagan that 
we need to build support by sharing info about the CBI's 
illicit conduct, similar to the support we built for cutting 
off the U-turn license. Levey said that it would be better to 
focus on limiting other central and commercial banks' 
business with the CBI. Noting that the banking industry 
relies heavily on reputation, Levey told Arditi that the 
right strategy is to continue exposing the illicit activities 
of Iranian banks and banking officials. 
 
European Banks' Business with Iran 
---------------------------------- 
 
9.(S) MFA interlocutors revisited the progress of European 
banks in non-proliferation efforts. In a November 16 meeting 
with Yossi Gal, Senior Deputy Director General, and Alon Bar, 
Deputy Director General for Strategic Affairs, Gal raised 
concerns that Italy and Germany were falling short in their 
commitment to enforce sanctions within their banking sectors. 
Gal told Levey that the MFA was planning a visit to Italy in 
December, but was unsure whether its attempt to persuade the 
politicians would filter down to action within the 
bureaucracy. Gal expressed the same concern about the banking 
sector in Germany, saying that resistance from the 
bureaucracy and the private sector often undermined attempts 
by political figures to improve German regulation. Bar and 
Gal encouraged Levey to join the GOI in pressing the 
governments and banking sectors of Germany and Italy to do 
more. 
 
Cautious Optimism on Gulf States 
-------------------------------- 
 
10.(S) On the status of UAE efforts to stem Iranian finance, 
Levey told Gal and Bar that he was optimistic about the 
country's efforts. Among other examples, he mentioned that 
the UAE had decreased the number of visas it was issuing to 
Iranian nationals and that Emirati ministers were receptive 
to his requests for increased banking regulation. 
 
11.(S) FM Livni told Levey that Israel continues to encourage 
the Gulf states to more publicly outline their actions 
against Iranian finance within their banking sectors despite 
the countries' reasons for keeping such actions secretive. 
She asked Levey to join in this effort. Levey affirmed that 
the USG was encouraging sanctions in all sectors and posited 
that the Iranians were beginning to feel the pressure. Livni 
asked if the declining price of oil was becoming leverage in 
the efforts to thwart Iranian financial efforts. Levey said 
that it was and that the Iranian private sector was becoming 
more vocal in its criticisms of the government. 
 
12.(S) Levey outlined for his GOI interlocutors recent 
 
TEL AVIV 00002760  003 OF 004 
 
 
efforts by Treasury to broaden its sanctioning of Iran to the 
shipping, insurance, and reinsurance industries. He cited the 
designation of IRISL as a positive first step and mentioned 
that Treasury had found willing partners in Europe and the UK 
to further efforts in this area. 
 
Effect of Sanctions on Iran 
--------------------------- 
 
13.(S) Dagan told Levey that the economic problems Iran is 
experiencing as a result of sanctions are encouraging debate 
within the regime. He said that in order to preserve the 
revolution, some key figures have begun to consider the need 
for change. The pressure is on, Dagan said, but he could not 
estimate when Iran would hit the brink. He noted that the 
lower cost of oil at the moment would likely prompt Iran to 
increase its production, thereby encouraging more business 
through the CBI. With oil prices low everywhere, however, 
Dagan and Levey agreed that Iran was a less attractive place 
for investment. Levey told Dagan that the present low oil 
prices provide a critical opportunity to convince other 
members of the international community to apply more 
pressure. 
 
14.(S) Livni asked Levey if there was a risk of Iran 
regaining a foothold in certain markets as a result of the 
world financial crisis. Levey said that the market turmoil 
has worked to the USG's advantage: the crisis has made 
financial institutions even more risk-averse, thereby 
lessening Iran's attractiveness even further. Additionally, 
while Iran's banks are isolated, its economy is not. 
 
U.S. Engagement with Iran 
------------------------- 
 
15.(S) FM Livni asked Levey during their November 17 meeting 
why the USG was considering a rapprochement with Iran through 
a U.S. Interests section in Tehran. She questioned whether 
the tactic would have a net positive outcome when measured 
against the negative perceptions such a move would be bound 
to create. Levey told Livni that this was a question better 
posed to the State Department, but that her concern was the 
central issue being debated by policy makers in Washington. 
In Levey's previous meeting with MFA officials Bar and Gal, 
he said that engagement with Iran would not work without 
leverage, indicating that sanctions would need to be in place 
no matter what the USG decides to do. 
 
--------------------------------------------- ------------- 
STEMMING PALESTINIAN TERROR FINANCE: GOI PLEASED WITH PA'S 
PROGRESS 
--------------------------------------------- ------------- 
 
16.(S) Levey told Arditi that Treasury's recent designation 
of the "Union of Good" was proof of the USG's commitment to 
continue to work against Hamas and Palestinian terrorists. 
Levey said, however, that while the USG supported efforts at 
thwarting terrorism in the territories, the USG wished to 
keep humanitarian goods flowing to the needy within the 
population. 
 
17.(S) Arditi told Levey that Palestinian Authority (PA) 
efforts at stemming terrorism within the territories were 
going quite well. He said the PA's positive efforts 
"surprised" his staff and that he "never thought" the PA 
would do so well. Levey said that Treasury coordinated with 
Prime Minister Fayyad on the Union of Good designation and 
was pleased to hear that PA efforts were held in high regard 
by the GOI. 
 
18.(S) When Levey inquired about efforts to prevent 
correspondent banking relations in Gaza from being severed, 
Arditi said that the Postal Bank "was on the agenda". Arditi 
lamented that the services provided by the Postal Bank would 
not be as good because of its small size and limited 
capacity. He expressed his hope that the central bank 
governor would be able to delay the commercial banks' 
decision to end their relationship with the Palestinians 
until a permanent solution was ensured. 
 
19.(S) This cable has been cleared by Under Secretary Stuart 
 
TEL AVIV 00002760  004 OF 004 
 
 
Levey. 
 
********************************************* ******************** 
Visit Embassy Tel Aviv's Classified Website: 
http://www.state.sgov.gov/p/nea/telaviv 
 
You can also access this site through the State Department's 
Classified SIPRNET website. 
********************************************* ******************** 
CUNNINGHAM